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Management HW # 4 - thereby risking their jobs 3 By raising...

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Management 100 HW 1) Jones Smith A B C D 4 4 5 1 3 1 E 1 5 2 2 5 1 F 1 3 1 5 1.5 1.5 a. The Nash equilibrium is CF. b. The payoffs for Smith and Jones are (1.5,1.5). c. There are no dominant strategies because the best option changes with each situation. Additionally, the Nash Equilibrium is not Pareto Efficient. 2) This change in pay will attempt to resolve the problem by affecting the workers’ desires to shirk. The increase in pay does not deal with monitoring shirking, but instead alters the incentives of workers. Normally, a worker has a strong incentive to shirk because, if fired, they could get paid the $2.00 wage somewhere else. However, by paying the workers $5.00, Ford replaced their desire to shirk with a desire to keep their jobs. Since no other company paid such a wage, the workers had less incentive to shirk,
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Unformatted text preview: thereby risking their jobs. 3) By raising the 4 th quarter targets to an unreasonable height, very few stores achieved the new bonus. As a result, this will lead to decreased productivity. One reason is that the stores have lost faith in the management, because management has not been consistent and has given no reason to indicate that the price targets will stop rising. This will discourage the workers because they will feel their efforts will never be good enough. Also, the unreachable price target will lead to a decreased productivity because since the workers know they will never be able to reach the target. Knowing that the will never reach a bonus, they have no incentives to work harder because they will still be getting their base salary....
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